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Saturday, December 12, 2009

Economics A-Z (D,E,F)

Deflation: Deflation is a reduction in the level of national income and output, usually accompanied by a fall in the general price level.

What is depreciation/ Developed country is an economically advanced country whose economy is characterized by a large industrial and service sector and high levels of income per head.

Developing country, less developed country, underdeveloped country or third world country: a country characterized by low levels of GDP and per capita income; typically dominated by agriculture and mineral products and majority of the population lives near subsistence levels.

Dumping occurs when goods are exported at a price less than their normal value, generally meaning they are exported for less than they are sold in the domestic market or third country markets, or at less than production cost.

Direct investment: Foreign capital inflow in the form of investment by foreign-based companies into domestic based companies. Portfolio investment is foreign capital inflow by foreign investors into shares and financial securities. It is the ownership and management of production and/or marketing facilities in a foreign country.

Direct tax: A tax that you pay directly, as opposed to indirect taxes, such as tariffs and business taxes. The income tax is a direct tax, as are property taxes. See also Indirect Tax.

Double taxation: Corporate earnings taxed at both the corporate level and again as a stockholder dividend

Economic growth: Quantitative measure of the change in size/volume of economic activity, usually calculated in terms of gross national product (GNP) or gross domestic product(GDP).

Duopoly: A market structure in which two producers of a commodity compete with each other.

Econometrics: The application of statistical and mathematical methods in the field of economics to test and quantify economic theories and the solutions to economic problems.

Economic development: The process of improving the quality of human life through increasing per capita income, reducing poverty, and enhancing individual economic opportunities. It is also sometimes defined to include better education, improved health and nutrition, conservation of natural resources, a cleaner environment, and a richer cultural life.

Economic growth: An increase in the nation's capacity to produce goods and services.

Economic infrastructure: The underlying amount of physical and financial capital embodied in roads, railways, waterways, airways, and other forms of transportation and communication plus water supplies, financial institutions, electricity, and public services such as health and education. The level of infrastructural development in a country is a crucial factor determining the pace and diversity of economic development.

Economic integration: The merging to various degrees of the economies and economic policies of two or more countries in a given region. See also common market, customs union, free-trade area, trade creation, and trade diversion.

Economic policy: A statement of objectives and the methods of achieving these objectives (policy instruments) by government, political party, business concern, etc. Some examples of government economic objectives are maintaining full employment, achieving a high rate of economic growth, reducing income inequalities and regional development inequalities, and maintaining price stability. Policy instruments include fiscal policy, monetary and financial policy, and legislative controls (e.g., price and wage control, rent control).

Economies of Scale.refers to the efficiency gained in a production process as the rate of production is increased. By sharing the costs of production; operating costs, and cost per unit produced, are decreased over time.

Elasticity of demand: The degree to which consumer demand for a product or service responds to a change in price, wage or other independent variable. When there is no perceptible response, demand is said to be inelastic.

Excess capacity: Volume or capacity over and above that which is needed to meet peak planned or expected demand.

Excess demand: the situation in which the quantity demanded at a given price exceeds the quantity supplied. Opposite: excess supply

Exchange control: A governmental policy designed to restrict the outflow of domestic currency and prevent a worsened balance of payments position by controlling the amount of foreign exchange that can be obtained or held by domestic citizens. Often results from overvalued exchange rates

Exchange rate: The price of one currency stated in terms of another currency, when exchanged.

Export incentives: Public subsidies, tax rebates, and other kinds of financial and nonfinancial measures designed to promote a greater level of economic activity in export industries.

Exports: The value of all goods and nonfactor services sold to the rest of the world; they include merchandise, freight, insurance, travel, and other nonfactor services. The value of factor services (such as investment receipts and workers' remittances from abroad) is excluded from this measure. See also merchandise exports and imports.

Externalities: A cost or benefit not accounted for in the price of goods or services. Often "externality" refers to the cost of pollution and other environmental impacts.

Fiscal deficit is the gap between the government's total spending and the sum of its revenue receipts and non-debt capital receipts. The fiscal deficit represents the total amount of borrowed funds required by the government to completely meet its expenditure

Fiscal policy is the use of government expenditure and taxation to try to influence the level of economic activity. An expansionary (or reflationary) fiscal policy could mean: cutting levels of direct or indirect tax increasing government expenditure The effect of these policies would be to encourage more spending and boost the economy. A contractionary (or deflationary) fiscal policy could be: increasing taxation - either direct or indirect cutting government expenditure These policies would reduce the level of demand in the economy and help to reduce inflation

Fixed costs: A cost incurred in the general operations of the business that is not directly attributable to the costs of producing goods and services. These "Fixed" or "Indirect" costs of doing business will be incurred whether or not any sales are made during the period, thus the designation "Fixed", as opposed to "Variable".

Fixed exchange rate: The exchange value of a national currency fixed in relation to another (usually the U.S. dollar), not free to fluctuate on the international money market.

Foreign aid The international transfer of public funds in the form of loans or grants either directly from one government to another (bilateral assistance) or indirectly through the vehicle of a multilateral assistance agency like the World Bank. See also tied aid, private foreign investment, and nongovernmental organizations.

Foreign exchange reserves: The stock of liquid assets denominated in foreign currencies held by a government's monetary authorities (typically, the finance ministry or central bank). Reserves enable the monetary authorities to intervene in foreign exchange markets to affect the exchange value of their domestic currency in the market. Reserves are invested in low-risk and liquid assets, often in foreign government securities.

Free trade: Free trade in which goods can be imported and exported without any barriers in the forms of tariffs, quotas, or other restrictions. Free trade has often been described as an engine of growth because it encourages countries to specialize in activities in which they have comparative advantages, thereby increasing their respective production efficiencies and hence their total output of goods and services.

Free-trade area A form of economic integration in which there exists free internal trade among member countries but each member is free to levy different external tariffs against non-member nations.